Which of the following best explains the preparation of a statement of owner's equity for a service business and the statement of owner's equity for a merchandising business?

A. Only a merchandising business includes ending capital.
B. Both types of business prepare the statement the same way.
C. Only a service business includes net income and beginning capital.
D. Neither type of business includes owner withdrawals.

Question

23-06-2024
Business

Answered

Which of the following best explains the preparation of a statement of owner's equity for a service business and the statement of owner's equity for a merchandising business?

A. Only a merchandising business includes ending capital.
B. Both types of business prepare the statement the same way.
C. Only a service business includes net income and beginning capital.
D. Neither type of business includes owner withdrawals.

Answer :

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GinnyAnswer GinnyAnswer · Answer 1 · 2024-06-23T12:43:59-04:00

Final answer:

The preparation of owner's equity statements varies between service and merchandising businesses.

Explanation:

Service Business: The statement of owner's equity for a service business typically includes net income and beginning capital.

Merchandising Business: In contrast, the statement of owner's equity for a merchandising business may include ending capital due to inventory considerations.

Hence, the preparation of these statements differs based on the nature of the business.

Learn more about Owner's equity statements for service and merchandising businesses here:

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